Browsing articles in "Media"

Thursday 4th December 2008

Government pressures banks on rates

by Alan Thornhill

Wayne Swan is blunt about it.

“The fact is that theÂ banks have to do more when it comes to business lending,” the Treasurer says.

“And they certainly have to do more when it comes to credit cards.”

He was speaking, of course, of the way Australia’s banks do – or do not – pass on the full rate cuts, announced by the Reserve Bank.

Swan recalled that he had praised both the NAB and the Commonwealth Bank for doing “just that.”

The response of the others, to Tuesday’s cuts, has been more restricted.

Swan recalled, too, that Malcolm Turnbull, who is now Opposition Leader, had written earlier this year that “banks are free to price their products as they wish.Â After all, they are in the business of making profits.”

This was, of course, an attempt to embarrass the opposition, on a highly sensitive issue.

He took those words from an article Mr Turnbull wrote for The Australian newspaper.

The politicking, on this issue, has been intense over the past few days.

The Opposition’s Deputy Leader, Julie Bishop, had accused the Prime Minister, Kevin Rudd, of “failing” to urge the banks to pass on Tuesday’s rate cut,” even though the Australian economy is now in sharp decline.

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Wednesday 26th November 2008

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Barack Obama sets his guidelines

by Alan Thornhill

Barack Obama is in no mood to waste time, in tackling the global economic crisis.

Although the President-elect will not take officeÂ until January, he has already named the team that will take on that task.

Its members include men, like Timothy F Geithner, who are already fully experienced in this kind of work.

Mr Geithner was deeply involved the the Bush administration’s weekend efforts to rescue the US banking giant, Citigroup.

Mr Obama said his team would begin work “today.”

He said too, that the Citibank crisis “has made it clear that we are facing an economic crisis of historic proportions.”

Mr Obama cited the sharp fall in new house purchases, a surge in unemployment claims and the likelihood of further job losses as evidence of the severe difficulties he will face, as US president.

But the troubled US car industry might well prove to be the most severe.

Mr Obama said the industry would not be allowed “simply toÂ vanish.”

But he warned that it could not expect a “blank cheque” from his government.

“While we can’t underestimate the challenges we face,” Mr Obama said, “we also cannot underestimate our capacity to overcome them.”

He said Americans had always been defined by a spirit of optimism and determination.

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Thursday 13th November 2008

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Rudd’s political dividend

by Alan Thornhill

The Prime Minister, Kevin Rudd, is enjoying a small political bonus, as he heads off to Washington for the G20 meeting, that is meant to set new directions for the global economy.

The latest Newspoll shows that his lead over his rival, Malcolm Turnbull has increased.

And, strangely, a new study shows that consumer optimism in Australia is rising.

The Westpac-Melbourne Institute of Consumer Sentiment rose 4.3 per cent this month.

With virtually all other studies showing both business and consumer confidence falling, that is a truly remarkable result.

So how did it happen?

Westpac’s chief economist, Bill Evans, thinks the government’s $10.4 billion stimulus package has something to do with it.

The government’s response to the global economic crisis has certainly been swift, energetic and strong.

We will, of course, have to wait a while yet, to discover whether it was also right, as well.

But that is inevitable, in times of crisis, like the present.

Mr Rudd isn’t having it all his way, though.

The US President, George Bush, is still mighty sore about suggestions, Down Under, that he had no idea what the G20 is.

And Mr Rudd, certainly, the Prime Suspect, in all that.

So he can expect to be hog tied, metaphorically of course, in Washington, over that.

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Friday 7th November 2008

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Crisis to be “deeper” and “longer:” IMF

by Alan Thornhill

The global economic crisis is now expected to be deeper – and last longer – than originally thought.

The Federal Treasurer, Wayne Swan, revealed this today, in comments he made on the IMF’s latest World Economic Outlook.

Mr Swan’s statement is reproduced, in full, below:-

“The International Monetary Fund (IMF) today released an update of the World Economic Outlook, which reveals further deterioration in the global economic outlook since October. Â Â These are the second set of forecasts released by the IMF in less than a month â€” demonstrating how rapidly global events are unfolding.

Both the IMF and the Treasury are expecting a recession across major advanced economies, as a result of the worst global financial conditions since the Great Depression. Â The IMF now expects the global downturn will be deeper and more prolonged than it previously anticipated.

Global growth is projected to be 3.7 per cent in 2008 and 2.2Â perÂ cent in 2009. GDP in advanced economies is expected to fall by 0.3 per cent in 2009 â€“ the first annual contraction during the postwar period. The IMF now expects a recession in the United States, the Euro area, the United Kingdom and Japan.

Like the Government, the IMF has said that the global financial crisis presents serious downside risks to the global economy amid an exceptionally difficult and uncertain environment.

Australia is not immune from these global difficulties, but we are better placed than most other countries to withstand the fallout.

While the global financial crisis is causing a global recession, Australia is expected to continue to record modest growth and compares favourably with most other advanced economies.

The IMF expects the Australian economy to grow by 1.8 per cent in 2008-09, which is broadly consistent with the forecasts in the Mid-Year Economic and Fiscal Outlook.

The IMF has highlighted the importance of Government action to strengthen financial markets and Â Â support economic growth.

Consistent with this, many countries are now discussing fiscal stimulus packages, with the IMF advising that fiscal stimulus can be made more effective if it is â€˜well targeted, supported by accommodative monetary policy, and implemented in countries that have fiscal space.â€™

The Rudd Government has already acted early and decisively through its Economic Security Strategy to strengthen our economy and support households during these difficult and uncertain times.

The Economic Security Strategy is expected to add half to one percentage point to GDP growth and create up to 75,000 additional jobs over the coming year.

This, along with recent interest rate reductions, means that fiscal and monetary policy are working in tandem to strengthen Australiaâ€™s economy in the face of the global financial crisis.

Consistent with the IMFâ€™s call for better international financial sector policy coordination, the Government will continue to actively work with international counterparts, particularly through key forums such as the G-20, to coordinate an effective global response to the current turmoil.”

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Thursday 23rd October 2008

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MPs flounder in crisis

by Alan Thornhill

Even allowing for political hyperbole, this was egregious.

“It has now caused enormous uncertainty in the financial markets of Australia.

“Greater than that created by any event overseas.”

This was the Deputy Opposition Leader, Julie Bishop, speaking in an urgency debate in Federal parliament yesterday.

She was commenting on the changes the government foreshadowed to its deposit guarantee arrangements, when it signalled that there would be an insurance fee, for the guarantee for deposits above $1 million.

How’s that again?

This change, according to Ms Bishop, has given local markets a bigger hit than, say, the sale and cooking of dud mortgage products, in the United States?

This silly claim brought the immediate response it deserved.

“That’s rubbish,” a government backbencher interjected.

But Australia’s most unfairly maligned public servant, the Treasury Secretary, Ken Henry, had also answered the same point, earlier in the day, much more temperately.

He had said that it was simply unrealistic to get a response package, like the one the government announced on October 12, absolutely right, in all detail first time.

That is simply not the way the world works, in such difficult circumstances.

The Finance Minister, Lindsday Tanner, made some fascinating observations in theÂ urgency debate.

He said that, faced with the enormity of the global financial crisis, the opposition had, at first, offered its full co-operation, to the government.

The Opposition Leader, Malcolm Turnbull, had even signalled his willingness to join a “war cabinet” Mr Tanner said.

The Finance MInister admitted that Mr Turnbull had not actually said that.

But he said that had been clear from his political posture.

That, too, might be political hyperbole.

Australia, after all, is still a democracy.

And we should all have faith in that system, even though the greatest democrat of the 20th Century, Winston Churchill once declared democracy to be the worst of all political systems, “except for all the others.”

Churchill had a point.

After almost 12 years in government, the Coalition might be forgiven for struggling a little with opposition, at first.

Opposition, certainly is difficult.

But we are all, ultimately, responsible for the work we do.

And the opposition, certainly, needs to do better than it is, at present.

There is a great deal at stake, in the current crisis.

And what people say does matter.

Especially in a global financial crisis.

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Wednesday 22nd October 2008

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The crisis gets personal

by Alan Thornhill

Your correspondent has been covering Federal parliament over a period of 34 years.

(With two brief periods out, for good behaviour).

And he has seldom seen a debate as bitter as that in the House of Representatives yesterday, over aspects of the global financial crisis.

It was set off by a report in The Australian yesterday, alleging that the government did not have the approval of the Reserve Bank on Sunday October 12, when the Prime Minister, Kevin Rudd, announced a sweeping plan to guarantee both bank deposits and interbank debts.

Naturally enough, the opposition seized on that, and questioned both Mr Rudd and his Treasurer Wayne Swan, closely.

The government insisted that the report was not accurate.

Mr Rudd said the Treasury Secretary, Ken Henry, had assured him that the Reserve Bank – and other regulators – approved the plan, before he announced it.

But the Opposition Leader, Malcolm Turnbull, was not satisfied.

He accused Mr Rudd of using Ken Henry as “a human shield.”
He said that did not square with the repeated assurances that Mr Rudd has given, since them, that he had sought approval from the Reserve Bank.

Pedantically, Mr Turnbull had a point.

And his deputy, Julie Bishop, pushed it, saying:”In their rush to get cameras into the Cabinet room they (the government) did not have time to pick up the phone.”

The Reserve Bank Governor, had undercut the argument the opposition was making, shortly before Mr Turnbull spoke, by describing the government’s decisions as “sensible.”

The government responded bitterly.

Mr Rudd accused Mr Turnbull of getting too excited and acting like a child who had drunk too much red cordial.

Wayne Swan went further.

“The Leader of the Opposition does not actually believe in anything but himself,” Mr Swan said.

He said Mr Turnbull had once applied for membership of the Labor party.

After leading the Republican movement, he had become a monarchist.

Mr Turnbull had not merely based his reckless argument on a false report in a newspaper.

But he had done so with “slippery lawyer talk” Mr Swan said.

The debate was a disgrace to both sides.
He accused Mr Turnbull of acting recklessly, at a time of deep crisis

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Tuesday 21st October 2008

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The US must borrow to survive:What about Australia?

by Alan Thornhill

Australia will – probably – not have to borrow, to sustain its economy through the present global crisis.

That, of course, is not yet certain.

But, with a crisis package worth $10.4 billion – against what, originally, was to be a $22 billion surplus, there appears to be a strong chance that borrowing won’t be needed.

The United States, where the crisis began, has not been so lucky.

It will have to go, once again, to foreign lenders, to see it through the present trouble.

Especially as the chairman of the US Federal Reserve, Ben Bernanke, is now advising Congress that heavy government spending – on top of the $US700 billion bail out package -will be needed to keep America out of a deep recession.
And that will be expensive.

Interest rates are low, at present.

However, we can expect that they will rise, as the global economy recovers.

Just where, though, does Australia really stand, in all this?

The truth is that not even the Rudd government itself knows that, at present.

The best estimate will come next month, when the Federal Treasury publishes its regular Mid Year Economic and FinancialÂ Outlook document.

Treasury economists are currently using a lot of electricity, working late into the night onÂ that paper.

But, even when it is published, the MYEFO, as it is affectionately known, will contain a lot of guess work.

Downturns do terrible damage to Federal budgets.

They cut tax receipts.

They increase spending, on items like unemployment benefits.

And the longer they last, the more damage they do.

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Monday 20th October 2008

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Tough times are coming:Rudd

by Alan Thornhill

The Prime Minister, Kevin Rudd, was blunt about it.

In a television appearance last night, he said”Tough times are coming.”

Mr Rudd said the troubleÂ had started when US banks, in particular, had made housing loans to people who could not afford to repay them.

“That created a crisis of confidence in the banking system,” Mr Rudd said.

“And then, on top of that, you had slowly the freezing up of credit markets.”

He said the American banks had not disclosed what they were doing.

But Mr Rudd added that Australia’s banks are “in strong working order, very strong working order.”

But toÂ make sure that their reputation overseas “continues to be underpinned” the government had guaranteed deposits in Australian banks.

It had also put $10.4 billion into an economic security package, to preserve economic growth and jobs in Australia.

Why had the government done this?

Because the government is worried about the impact that events overseas could have on the Australian economy.

“We set aside a big surplus at the beginning of the year,” Mr Rudd said.

“And the time has come to draw down on that surplus.

“It was set up for those tough times and those tough times are coming,” he said.

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Profile

Alan Thornhill is a parliamentary press gallery journalist. Private Briefing is updated daily with Australian personal finance news, analysis, and commentary.

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